Star­tups pounce

Alia McMullen, Finan­cial Post

It is not often some­one gets to start a power-generation com­pany from the ground up, par­tic­u­larly when that per­son is fresh out of uni­ver­sity. But that is one com­pany among the many that are sprout­ing from Ontario’s antic­i­pated green exper­i­ment — a new direc­tion for an econ­omy suf­fer­ing the demise of North Amer­i­can manufacturing.

“It’s going to be major,” said Brian Maxwell, a recent eco­nom­ics grad­u­ate from Queen’s Uni­ver­sity and co-founder of Now­So­lar Inc., who is anx­ious to hear the terms for Ontario’s new Green Energy Act. The solar power devel­op­ment com­pany Mr. Maxwell and struc­tural engi­neer­ing grad­u­ate Scott Mather started in Feb­ru­ary is designed to tap into the incom­ing Feed In Tar­iff pro­gram, a sec­tion of the Act that would allow indi­vid­u­als and busi­nesses to sell energy to util­ity ser­vice providers at rates that are the third-highest in the world after Spain and Italy.

Ontario is the first province to offer such a pro­gram and the rest of the coun­try is watch­ing closely to see if it pays off. The Act was passed in June but will not take effect until the program’s guide­lines have been estab­lished, a process the Min­istry of Energy and Infra­struc­ture said would take a few more months. Even so, busi­nesses have begun to posi­tion them­selves to pounce on the new opportunities.

The Feed In Tar­iff pro­gram, for instance, has allowed for the cre­ation of a new type of power-generation com­pany, such as Now­So­lar. The company’s objec­tive is to build million-dollar solar panel instal­la­tions on land or roof space rented from indi­vid­u­als and cor­po­ra­tions. The com­pany earns money through the energy pro­duced by the solar pan­els and the lease holder, who is effec­tively an investor in the project, receives a 10% return on the earnings.

The Ontario Power Author­ity released draft Feed In Tar­iff rates on July 8 that vary depend­ing on type and size of a project. Project types include solar, wind, water­power, bio­mass, bio­gas and land­fill gas.

“There’s a lot of peo­ple just get­ting into it like us. We have heard of com­pa­nies being approached by sev­eral dif­fer­ent par­ties,” Mr. Maxwell said, not­ing there has also been inter­est from large com­pa­nies from France and Spain.

While there is some move­ment, com­pa­nies are anx­iously wait­ing for the release of the offi­cial terms, con­tract details and guide­lines before start­ing their projects. The key con­cern is what the pro­posed provin­cial con­tent require­ments will look like. Busi­nesses will need to ensure a set per­cent­age of a project is sourced from Ontario, how­ever the gov­ern­ment has not indi­cated what that will be.

If the per­cent­age is too large, Mr. Maxwell said, it could derail his company’s project. Solar pan­els are not pro­duced in Ontario and it could take years for a local man­u­fac­turer to get up and run­ning, he said.

“We’re in a wait-and-hold period until the final con­tract comes out,” Mr. Maxwell said.

Amy Tang, a spokes­woman for the Ontario Min­istry of Energy and Infra­struc­ture, said the gov­ern­ment will take a “bal­anced approach” to the local-content require­ment, which is designed to encour­age invest­ment in Ontario. Con­sid­er­able progress has been made in fine-tuning the reg­u­la­tions since the Act was passed, but a con­ser­v­a­tive esti­mate for the release of the details would be in the next cou­ple of months, she said.

Robert Hor­nung, pres­i­dent of the Cana­dian Wind Energy Asso­ci­a­tion, said the provin­cial con­tent require­ment is meant to cre­ate oppor­tu­ni­ties for Ontario-based com­pa­nies to enter the green-energy sup­ply chain, but that busi­nesses in other provinces and coun­tries could take advan­tage of the Act. He said there were many oppor­tu­ni­ties for busi­nesses, whether in man­u­fac­tur­ing, the sup­ply chain, or services.

“A wind tur­bine has 8,000 com­po­nents. There’s a lot of oppor­tu­ni­ties in the pro­vi­sion of lubri­cants, light­ing sys­tems, bolts, and all sorts of other things. It’s not nec­es­sar­ily that it becomes the dom­i­nant fea­ture of a busi­ness, but it becomes a new line asso­ci­ated with an indus­try that is grow­ing quickly.”

The province has the skill set and the equip­ment to begin to pro­duce entire wind tur­bines and other renew­able tech­nolo­gies, said Ed Bernard, pres­i­dent of XAG Energy Inc., a sup­ply chain man­age­ment com­pany focused on help­ing Ontario’s busi­nesses make the tran­si­tion into renew­able energy, par­tic­u­larly those left stranded by the demise of the auto man­u­fac­tur­ing industry.

“We’ve got high lay­off num­bers of highly skilled peo­ple. There’s no ques­tion that we could build entire tur­bines right here,” he said.

“But all of the wind tur­bines we are erect­ing here in Ontario, they’re all built in Europe.”

He said it cost between $2,000 and $3,000 to trans­port the tur­bines from Europe, and pro­duc­tion costs are not cheaper. Despite the pos­si­bil­i­ties, Mr. Bernard con­tends Ontario busi­nesses gen­er­ally are not ready to tap the bud­ding renew­ables mar­ket because a lot of man­u­fac­tur­ers had depleted their resources when con­di­tions in the sec­tor tightened.

XAG Energy devel­oped an assess­ment process called NextGen Ready that will help man­u­fac­tur­ers tran­si­tion into renewables.

The range of busi­ness that can get involved is wide, Mr. Bernard said, point­ing to sec­tors such as gear box man­u­fac­tur­ers, sur­vey­ors and map­pers, plas­tic injec­tion mould­ing, tem­per­a­ture and icing-sensing sys­tems, edu­ca­tion and train­ing, metal stamp­ing, and crane operation.

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